Europe benzene prices resilient despite drop in crude futures

10 May 2012 15:16  [Source: ICIS news]

LONDON (ICIS)--European benzene prices have been resilient amid healthy market fundamentals and balanced-to-tight supply, despite a sharp drop in crude and energy futures this week, sources said on Thursday.

After closing on Friday May 4 at $1,2501,260/tonne (€963970/tonne) CIF (cost, insurance and freight) ARA (Amsterdam-Rotterdam-Antwerp), a $2025/tonne dip from earlier in the day as upstream markets faltered, May benzene values have been relatively steady over the course of this week.

May is currently valued at $1,2401,260/tonne CIF ARA, with a deal reported at $1,250/tonne, while June is backwardated at $1,2301,250/tonne.

Crude prices fell by more than $4/bbl on Friday May 4 following weaker-than-expected US jobs data and general macroeconomic bearishness in Europe owing to political instability, and continued to soften over the course of this week.

European naphtha prices have also plummeted in light of the drop for crude, the losses also driven by weak demand.

Yet after an initial drop late last week following the sizable drop for crude, European benzene prices have held firm against the waning fortunes of upstream markets.

The market began to reverse the generally bearish trend seen towards the end of the first quarter in mid-to-late April, when derivative demand started to pick up and some shortness became apparent.

Owing to softer benzene prices in the first quarter, a significant portion of feedstock pyrolysis gasoline (pygas) was diverted from benzene to the gasoline sector.

One source pointed out that with propane trading at around $200/tonne lower than naphtha, cracker operators will veer toward the lighter feedstock, resulting in less pygas production.

“Benzene is likely to be short for a while,” said one European aromatics trader.

The weak demand and pricing seen in Europe from February also meant that the regular benzene imports from markets such as Oman, India and Turkey had been diverted elsewhere.

As a result, availability has been curtailed in recent weeks. Several players noted that more traders have been actively looking for cargo to cover short positions following the upturn in the market.

Additionally, demand for benzene is expected to remain healthy in the coming weeks as several derivative turnarounds come to an end, further pulling on European volumes in May.

The May benzene contract was agreed at $1,254/tonne FOB (free on board) NWE (northwest Europe) and converted to the euro price of €948/tonne at the agreed exchange rate of €1:$1.3228. This was a rise of €58/tonne from April.

($1 = €0.77)

Follow Truong Mellor on Twitter for daily tweets on the aromatics markets

By: Truong Mellor
+44 208 652 3214

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